In several recent private letter rulings, the Internal Revenue Service has granted extensions to taxpayers to file written representations for split-dollar loans. By being covered under a private letter ruling, affected employees were able to avoid significant tax increases of taxable compensation for all prior periods.

Parties to a split-dollar life insurance arrangement (SDA) who fail to timely file written representations with the Internal Revenue Service (IRS) for split-dollar loans may not be out of luck. Filing written representations with the IRS for split-dollar loans is not always applicable, but it can be very beneficial to an employee to do so. In several recent private letter rulings, the IRS granted extensions to taxpayers to file these representations. By being covered under a private letter ruling, affected employees were able to avoid significant increases of taxable compensation for all prior periods. We suggest reviewing whether written representations have been timely filed for split-dollar loans that are repayable solely from a life insurance policy, because administrative relief may be available to avoid adverse tax and reporting consequences for the parties. The remainder of this On the Subject describes the following:...